AMA First Investment

Will be LIVE on 31st Jan 2019. Ask your questions here!

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AMA First Investment

(AMA Ended) Calling everyone who is looking to make your first investment in 2019. Ask the community anything!

NOTE: This is part of a AMA series in a lead up to our Seedly PFF2019 happening in March this year. This Community-AMA will go live on 31st Jan 2019, between 7 - 9pm where our community will answer all the questions together :)

Hi Seedly Community!

We know that taking the first step in investing is often a huge one for most Singaporeans. That’s why we decided to host this AMA to help you with your first steps.

This AMA is special as the topics are focused on investing and taking that first step. The best part? Our community - consisting of experienced investors and knowledgeable individuals - will aim to answer you by 31st Jan 2019, Thursday, between 7 to 9pm!

  • Who should ASK: Beginners who are planning to make a first investment in 2019
  • Who should ANSWER: Investment enthusiasts and experienced investors on Seedly

You can ask questions in the following areas:

  1. When do I know when I should start investing?
  2. What tools do I need to start investing successfully?
  3. How much should you start with and how much is enough?
  4. What is the right strategy and mindset for an investor who is just starting out?
  5. Dollar Cost Average (DCA) monthly OR Lump Sum Investing (LSI): Which is better for me?
  6. Is investing in the STI (Straits Times Index) a good move for a first time investor?
  7. Should I buy an individual stock, an Index fund or a Unit Trust?
  8. Should I invest in a bear or bull market?
  9. Can (and should I) invest with my CPF?
  10. What does successful investing look like?

NOTE: Questions answered by the community will be up to their discretion and preference. The AMA is moderated by the Seedly Team. So let’s keep the questions friendly and open! To our community members, if you see a question you can answer, do jump in as well :) We celebrate collaborative learning here!

  • Asked by Anonymous

    Lim Wei Siang
    Lim Wei Siang, Financial Consultant at Advisors Alliance Group - Aia Fa
    Level 2. Rookie
    Answered on 07 Mar 2019
    Have you spoken to any Financial Consultant? I would encourage you to do so. - Having that inheritance is a bonus - Do up a cash flow to understand your spendings and amount you are able to set aside - I believe you are young so time is to your advantage if you are looking at insurance coverage or investing for your lifestyle or future retirement needs - Understand your own risk appetite and what you wish to achieve if you were to do any form of investment - Understand that financial wealth is only figures in your bank account with no value if you are not using it to generate more wealth for you. Fixed deposit, Regular Saving Plan, Endowments, ILPs and investments are some different avenues you can look into. Your actions will lead to reactions/consequences. Equiped yourself with the knowledge to increase the number of choices you have. Only then, a decision with a consequence you can bear will be made.
  • Asked by Anonymous

    Yeo Enk Loui
    Yeo Enk Loui
    Top Contributor

    Top Contributor (Mar)

    Level 6. Master
    Answered on 12 Feb 2019
    Hi! Just a small add on point as to how you could systematically research on individual stocks: 1) Macroeconomic Analysis Looking at how current macroeconomic trends may affect future price movements for stocks eg: US-China Trade War? Brexit? Forecast of slower global GDP Growth by IMF? 2) Industry Analysis Looking at how the industry performance may be affected, perhaps due to global factors eg: oversupply of oil, leading to decreased profits for companies in the energy industry? Is this a dying industry? 3) Fundamental Analysis Looking at the specific company's health by looking at the ratios as suggested by the others. Hope this helps!
  • Asked by Anonymous

    Isaac Chan
    Isaac Chan
    Top Contributor

    Top Contributor (Mar)

    Level 6. Master
    Answered on 12 Feb 2019
    Hi there! The answers given by the others are good and comprehensive But I would perhaps like to stress a point that the others might not have stressed yet, and that is, the learning of the fundamentals of any investment product. Yes, it is important to understand how REITs, bonds, and FX trading operates, but ultimately, it would be very helpful to understand what underlying factors affect the investment product you are looking at. Is it central bank interest rates? Is it a company’s earnings? Is it the trade war between US and China? Understanding how the investment products are affected by their fundamentals finally helps you to understand what kind of investment decisions to make, such as buying and selling, and how long to hold the products. Investment products, though are represented by numbers, are finally affected by real world events and happenings, and trying to understand what factors influence them is crucial. This also helps you to guard against panic buying and selling, and cautions you on being influenced by the herd mentality (“im going to buy this share because everyone seems to be buying it”) Such a learning task may seem daunting at first, but there are plenty of resources online, such as the website Investopedia, which offers some interesting insights into different asset classes. Perhaps focus on learning one asset class at a time, instead of rushing and feeling overwhelmed. Going head first and just buying and selling without much thinking is more akin to gambling than investing!
  • Asked by Anonymous

    Chuin Ting Weber
    Chuin Ting Weber
    Level 3. Wonderkid
    Answered on 01 Feb 2019
    Hi Anonymous, this is Chuin Ting Weber, CEO & CIO of MoneyOwl. I infer from your question that you are thinking of implementing the strategy of Bridgewater/Ray Dalio's "All Weather Portfolio", namely, the strategy of Risk Parity. To re-cap quickly on Risk Parity: in traditional asset allocation, you allocate according to asset classes, e.g. 50% equities and 50% bonds. In risk parity, conceptually, you allocate according to risk. For example, if you thought that equities were twice as risky than bonds, then one way of doing risk parity would be to allocate much less to equities and much more to bonds. A usual proxy for risk is volatility. But this is probably too simplistic for most funds. For Bridgewater, All Weather was meant to be a systematic, "automatic" way of investing. All Weather allocates to assets that respond differently in four environments (hence "weather"), namely, combinations of rising growth, falling growth, rising inflation, falling inflation. 25% of risk is allocated to asset classes that perform well in each (this is all on Bridgewater's website): - Rising growth: equities, commodities, corporate credit, EM credit - Rising inflation: inflation-linked bonds, commodities, EM credit - Falling growth: nominal bonds, inflation-linked bonds - Falling inflation: equities, nominal bonds The idea is that the returns are not cancelled totally and net returns are more than cash over time. Some roboadvisors, e.g. WealthFront, have introduced risk parity ETFs. There is even one roboadvisor that also uses the term "All Weather". I have the following difficulties with recommending All Weather/ Risk Parity as a main strategy for investors. - What is the motivation behind why we want to have a risk parity portfolio rather than a traditional portfolio? All Weather is a beta strategy. Meaning it moves with the markets. But because of risk parity, in rising markets, it will underperform say, a 60/40; but in falling markets, it will perform less bad. But being beta, it does not return positive when markets fall. (That's why Bridgewater came up with Optimal portfolio with an "alpha" element in 2015, but that has its own issues as well.) It would seem that the objective of risk parity is to achieve higher risk-adjusted returns as a whole over time. As far as investment lingo goes, that seems to be a very decent objective. But from a personal financial planning point of view - can you "consume" risk-adjusted return? I would say no, as what matters is the actual return and whether it can help you retire. And what actually is risk? Risk is often proxied by volatility. If you do not have the capacity or willingness to take the volatility of say, a 80/20 fund, why not then have a more moderate portfolio with less equities? - Following from this point, I do not know what is the expected return of Risk Parity and therefore I do not know whether or not it will meet your need for return, because Risk Parity is not an asset class. Of course there is a return target, but that is just a target by managers. There are many different ways to implement Risk Parity and the ultimate returns you get will be very dependent on the individual manager or investor's active decisions. Even though Bridgewater's system is supposed to be quite automatic, I suspect that most managers (or investors ourselves if we try to implement from scratch) will have to make multiple active calls/decisions to implement, and managers will want to try to read the macro market to "overweight" and "underweight" and choose which EM credit depending on macro environment, and change them around to beat the market. After all, if it does not beat the market, why would investors pay higher fees than say, indexed funds? For those of us in Singapore, just the issue of what you do with the foreign currency exposure - given that many instruments are not avialable locally - will be another decision, because it actually adds foreign currency risks, which you should "pare" out also. - Costs involved in implementation are likely to be very high. If you want to implement from scratch, the number of securities you have to buy will be very large and there will be frictional costs for small portfolios. When you want to rebalance the risks, it is going to be complicated, you have to run through a model and then buy and sell - there will be costs. Of course, you can check out the ETFs, but these costs for active funds will generally be higher than for passive ones - the question is whether it is worth it in terms of net returns. Perhaps we can take a leaf out of the book of institutional investors. I have said that "risk parity" is a strategy and not an asset class. What is an asset class is "hedge funds" in general (or you can say it is a sub-asset class under the asset class called "alternatives"). Bridgewater is such a hedge fund. Institutional investors do allocate to hedge funds, but usually limit exposure, e.g. university endowment funds that have a long investment horizon will go for say, 20% in alternatives, and generally not more than 5% in each fund or strategy. The thing is, hedge fund performance is really dependent on manager skill and included in the portfolio generally because it gives uncorrelated return to traditional asset classes, but there is often a question if the return is not just leveraged beta - and All Weather is indeed beta. For me, it is really a question mark over whether fund managers can perform consistently over the long term to beat the market. Over the past years, for all the trouble that fund managers go to and all the costs, it has been very hard to beat the market especially on a net basis. So if you wish to try it out, maybe you can consider a small percentage of your portfolio in this strategy, but bear in mind the implementation problems mentioned above especially if you do not have a lot to start with. But for your main portfolio, from a financial planning point of view, the portfolio that you invest in to help you accumulate wealth should be based on your (1) need to take risk (what is your required return, e.g. to fund your retirement) (2) ability to take risk and (3) willingness to take risk. For most of us, a globally diversified portfolio comprising of equities and bonds should suffice. Less is more when it comes to investing. Find the correct asset allocation for you such that you can bear short-term volatility without panicking and selling off, search for portfolios that put this asset allocation together using low-cost funds that do not time the market, and capture market-based return by staying invested over the long term. That would probably be the best bet for your investing experience and for your financial goals. All the best! Chuin Ting Weber
  • Asked by Anonymous

    Luke Ho
    Luke Ho, Money Maverick at Money Maverick
    Level 6. Master
    Answered on 02 Feb 2019
    The one ETF everyone knows about is certainly not diverse in nature (The STI ETF). Consider the all-in cost including any account fees, trading fees, managing fees, rebalancing fees. Recognize that this is designed to be a long term decision. Diversification should come across sectorally, not globally - meaning that it should be widespread across sectors like consumer staples, financials, tech, etc, not across countries like China, US, Malaysia, etc. Which is a little bit why the STI is a piece of gunk. You could do much better than an ETF, but its your call.
  • Asked by Anonymous

    Jonathan Chia Guangrong
    Jonathan Chia Guangrong, Fund Manager at JCG Fund
    Level 6. Master
    Answered on 01 Feb 2019
    Learn a new instrument, like managing a portfolio of options on US stocks. Its like operating a casino or an insurer in the stock market where you keep collecting premiums. 'Payouts/claims' can be fixed and turned in your favour. You don't need a high amount of capital as compared to the amount required to hold stock over time, and the returns are potentially much better compared to holding stock.
  • Asked by Elisha Lacaste

    Nicholes Wong
    Nicholes Wong, Diploma in Business Management at Nanyang Polytechnic
    Top Contributor

    Top Contributor (Mar)

    Level 6. Master
    Answered on 01 Feb 2019
    US does not have a tax treaty with Singapore. So if you were to buy US stocks or ETFs, you will be charge 30% withholding tax on your dividends from US stocks/ETFs. Ireland have tax treaty with US. So Irish domiciled etfs only need to pay 15% instead of 30% for US stocks.
  • Asked by Anonymous

    Kenneth Lou
    Kenneth Lou, Co-founder at Seedly
    Level 8. Wizard
    Answered on 01 Feb 2019
    Hi there! Good question. I would consider a few things: 1) Invest in what you are more familar with. Is it the companies that make up the STI Index? Or is it REITs and real estate and you believe that the Real Estate market is doing well and sustainable? 2) Do you want to take on a more passive or active method? Active: Means you actually need to go and pick out REITS. There are REIT ETFs but here is an answer between REIT and REIT ETFs which was found here: "Personally I'll avoid the reit etf and just buy the individual reit counters. The Etf gives a lower return and there's management fees involved. I'll suggest going through a simple course on reits like the one from Dr Wealth to gain a basic understanding of reits before you start investing. You can also start doing dca into individual reit counters via maybank ke's monthly investment plan once you know what counters you are going for. Hope this helps" Passive: You can simply start on the STI ETF and buy the index fund. It buys into the 30 companies that form the STI index.
  • Asked by Tee-Ming Chew

    Yong Kah Hwee
    Yong Kah Hwee
    Level 6. Master
    Answered on 28 Jan 2019
    First investment was in Starhub, because I read a random article saying Starhub was a good stock to buy. That was 4 years ago. I made a 30% loss after selling it last year :( Moral of the story: don't blindly follow "financial advice". Do your homework!
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